Companies that don’t change will be replaced

“Companies that don’t change will be replaced” A quote from Michele Zanini from Management Exchange in November’s CMI conference.

I live blogged from the conference; exhausting, I don’t know how Kingfishers and Figs do it.

This stuff really landed for me so in case you didn’t see it on the CMI site; here it is on mine.

Michele Zanini’s Toxic assumptions about change:

No 1 The pace of change
Michele talked about the pace of change; and offered the thought that organisations are already living in the past. Leaders only know change needs to happen when it’s a problem; they’re too late!
Eg Nokia – the 2011 burning platform – it was too late to change. It was simply too late; those who knew – didn’t have the authority to shape a change agenda, so by the time the need got up to the CEO, it was simply too late to change.

No 2 It has to be cascaded
It sounds like a wonderful theory.   “Who are you kidding?” says Michele. When change is rolled out as a cascade – it’s often resisted, often derailed.  Data from McKinsey shows that 70% of transformation efforts fail. No 1 cause of failure – 39% is employee resistance. 33% is management behaviours being incongruent with change. Lack of resources/other is the remaining percentage.

No 3 assumption Change is engineered
This might be true for specific discrete tasks, but deep large scale change – it’s hard to predetermine the right answer (relies on the mind of the engineer).

Extreme example” JC Penney
2011 brought in Head of Apple retail – he architected a radical plan – pricing, like an Apple Store, a cultural “cleanse” – overhaul everything JC Penney stood for.. The most radical example – created a huge acrylic box, where employees were encouraged to put new symbols and pick up new symbols to signify new culture. No consultation. People hated it.

He ignored them. 2012 company shrunk sales by $4bn left in 2014, company’s market price went down by half, 20,000 people lost their jobs.

We need a new paradigm for thinking about change, need to overturn these beliefs.

Management lab think about it by building a change platform, make three shifts
• From top down to activist out
• Change needs to be shifted from sold to invited – let other people figure out how to help you solve it
• From managed to organic, rely on self-organizing communities and experimentation *working with permanent slush” things moving too fast for the freeze stage.

Example; CEMEX
Progress in making change; construction is a localised industry in many locations. Locations didn’t talk to each other. They tried sending “emissaries” HQ staff then disseminated key information; didn’t work.
In 2010 they tried something different; they created peer communities of passion and interest. Tried informal and informal networks. Focussed on biggest priorities. Organic communities that anyone could start. They have been doing this for five years – now hundreds of these communities exist across CEMEX.
(View hackmanagement.com – some of the stories are here with more detail.)
They share documents, share insights, use video conferencing, offline conferences to support the communities.
Business impact
1. How do we think about construction in the 21st Century – 10 big priorities (eg sustainability, energy efficient buildings) defined the strategic agenda? Nominated people who would lead these priorities.
2. Ready mix products – 50 different countries community – first global brand – unprecedented. 33% of total revenue.
3. Alternative fuels – saving £130m
Quote from CIO “collaboration is how we get this done today. Our open connected approach as resulted in more speed and agility. Just as important, everybody feels something of something bigger, something important” Gilberto Garcia.
When individuals are given change to solve problems together change is natural.

How to hack:
• Culture
• Business model
• Management Model
• Operating Model
American group – Multiple retail brands
Two realisations from EO – first – to compete they needed to build up their innovation capabilities; make it a core part of DNA, second – not going to do it top down. Try something different, try to involve people, gives them the skills and the tools to embed the change.

Dos and don’t

First don’t and do
If you have a problem, don’t appoint a task force of the usual suspects- instead invite everyone to hack the issue.
Create innovation capability; – we ended up building a corporate innovation mooc, 3000 people were invited to take part. Build up the skills, give employees tools to think like business innovators, regardless of where they sit in the hierarchy. We generated hundreds of ideas that would eventually drive the strategy. We said “As a way to fundamentally changing the culture this is the opportunity you have to change the direction of the company. I really mean it. It’s not an interesting exercise – a pillar of our change.”
Reception was amazing 103 comments on opening blog; people truly appreciative.

Second do and don’t
Don’t package a high level sanitized account of the problem
Do encourage everyone to join an honest discussion of root causes and barriers.

E.g. people highlighted key barriers to innovation “we’re so focussed on the product we are forgetting about innovation about the way we serve clients, go to market”. What are we doing right that we are doing wrong? Create a conducive environment for creativity and innovation.
Ask – do we have the organisational structure for success?
A first in the company, people felt liberated. A lot of energy.

Third dos and don’t
Avoid the temptation to rush to an answer, relying on benchmarking and expert judgement. Let the community create its own path.
We used four lenses:
• Innovators – identify industry orthodoxies you can challenge
• Trends and discontinuities – emerging trends that are unappreciated
• Skills and assets that could be combined in creative ways
• Unmet customer needs.
We generated hundreds of ideas, how to choose?
Focus on one idea that is industry specific (give them some filters – e.g. potential in market place)
Then their task to build a business model around that idea. e.g. rethink the shoebox – what customers, what products, how do we make money. Where do the ideas converge? The level of participation surprised us; 2000 people generated 10000 ideas. Almost 100000 likes, 10000 comments. All voluntary – no time off to do the Mooc and the hack. Discretionary energy that this unlocked was amazing. We thought if we have 200 people, we would be in great shape.

Fourth do and don’t
Don’t create a grand plan in great detail, Do create a persistent hacking community. Develop a portfolio of experiments based on the best ideas, emerging process. We took 950 ideas clustered into 12 big themes, eg” rethink the customer experience, customizing the product.
Created self-managing teams, pitch their idea, create short lists, extended team, ability to experiment if selected.
Michele told us that he was presenting this live! It’s a work in progress – not declaring victory.

More dos and don’ts
• Don’t target a narrow set of practices or skills, do focus systemically on individuals and institution
• Change the way your management model works so it can be pro innovation.
• Now; Moving towards hacking management
• Internal crowdfunding platform, open source strategy process
• Change structure, self-organising, self-managing communities
• Establish real accountability for pro-innovation behaviours, eg legitimising dissent

Final piece of advice
Don’t focus on formal change, do embrace new principles and behaviours.
Previously business experienced a fad about TQM – it didn’t have much to do with culture – created quality circles; the problem was that most leaders only paid lip service to underlying values of TQM. Disconnect between what you’re saying and what you’re doing – leads to failure.
Leadership behaviours – means devoting attention to environment that means that leadership is less of a change agent, more of a change enabler.
One example of embracing new behaviours – opportunities to “ask me anything”. Reinforcing intent to change.
Interesting question – what could Nokia have actually done? For the future – companies that don’t change will be replaced by other companies. Eg the internal allocation of capital inside companies, is as big as bonds/capital market – if that’s not allocated properly because of inertia – a waste of resources.